The Alabama Securities Commission (ASC) recently released its annual list of top ten investor threats. Short term real estate investments made the list.  The Alabama Association of REALTORS® Policy Team reminds its members of the importance of using caution when dealing with any unsolicited investment opportunities.

The Report

According to the report, investors continue to be lured by the promise of earning quick money through real estate investments.  Real estate seminars, especially those marketed as an alternative to the more traditional retirement planning strategies involving stocks and bonds, should be treated cautiously.  Two of the most popular current investment pitches at these seminars involve so-called “hard money lending” and “property flipping.”  The report describes hard-money lending as referring to real estate investments financed through means other than traditional bank borrowing.  Investors may be tempted by the possibility of greater rates of return from hard-money lending.  Property flipping is the practice of purchasing distressed real estate, refurbishing it, and then immediately re-selling it in hopes of turning a profit.  Property flipping financed through borrowed funds or outside investments can be done entirely lawfully, but it also can be a source of fraud.  The report indicates that scammers may attempt to defraud potential investors in the flip by misrepresenting the value of the underlying property or its profit potential.

The Alabama Securities Commission Background

The Alabama Securities Commission (ASC) regulates the securities industry in Alabama. The ASC is committed to protecting investors against securities fraud and provides aggressive enforcement actions against any firm or individual who has violated the Alabama Securities Act or other state and federal statutes to the detriment of Alabama investors.

The AAR Public Policy Team will continue to monitor state regulatory agencies for potential impacts on REALTOR® members, the real estate industry, and private property owners.